ISLAMABAD (Reuters) - The United States has put forward a motion to place Pakistan on a global terrorist-financing watchlist with an anti-money laundering monitoring group, according to a senior Pakistani official.

Pakistan has been scrambling in recent months to avert being added to a list of countries deemed non-compliant with terrorist financing regulations by the Financial Action Task Force (FATF), a measure officials fear could hurt its economy.

The United States has been threatening to get tough with Islamabad over its alleged ties with Islamist militants, and last month President Donald Trump’s administration suspended aid worth about $2 billion.

Islamabad, which denies assisting militants in Afghanistan and India, has reacted angrily to U.S. threats of further punitive measures.

A meeting of FATF member states is due to take place next week in Paris, where the organisation could adopt the motion on Pakistan.

Pakistan’s de facto finance minister, Miftah Ismail, told Reuters the United States and Britain put forward the motion several weeks ago, and later persuaded France and Germany to co-sponsor it.

“We are now working with the U.S., UK, Germany and France for the nomination to be withdrawn,” Ismail said, speaking by telephone from Europe. “We are also quite hopeful that even if the U.S. did not withdraw the nomination that we will prevail and not be put on the watchlist.”

Pakistan was previously on the FATF watchlist from 2012 to 2015.

A senior U.S. official who follows U.S. policy in the region said Pakistan has “always been selective” in cracking down on militants who use its territory as a base.

“It is time for that to stop, and so we are working with our allies, who also are affected, to see effective action against groups such as the Haqqanis and elements of the Taliban,” said the official, referring to militants operating along the border with Afghanistan.

MONEY FLOWS

The FATF, an intergovernmental body based in Paris that sets global standards for fighting illicit finance, had previously warned Islamabad it could be put back on the list without further efforts to crack down on the flow of funds to militants.

Pakistani officials and Western diplomats say being put on the FATF watchlist could deal a blow to Pakistan’s economy as it would make it harder for foreign investors and companies to do business in the nuclear-armed South Asian nation.

“If you’re put on a terror watchlist, you’re made to go through all the (extra) scrutiny,” Pakistan’s former counterterrorism chief, Khawaja Khalid Farooq, told Reuters. “It can hurt the economy very badly.”

Officials also fear it would be harder and more expensive for Pakistan to borrow money from the international debt markets if it was put on the FATF monitoring list. Pakistan raised $2.5 billion at lower-than-expected rates in December.

Ismail said the FATF motion focussed on Hafiz Saeed, a Pakistan-based Islamist who India accuses of masterminding the 2008 Mumbai attacks that killed 166 people. That suggested the United States had put forward the motion at India’s behest, he said.

“The U.S. has consistently expressed our longstanding concern about ongoing deficiencies in Pakistan’s implementation of its anti-money laundering and counterterrorism finance regime,” said a spokesperson from the U.S. Embassy in Islamabad.

The United States was “absolutely not” acting on behalf of India in pressing Pakistan on the issue, the spokesperson said.

“In addition to broader systemic concerns, this also concerns Pakistan’s non-compliance with its commitments under the U.N. Security Council Resolution 1267,” the spokesperson added.

Resolution 1267 requires all states to freeze the assets of people and organisations on a list established by the resolution, including Saeed and his “Islamic charities”. Washington has designated Saeed a terrorist.

Saeed has repeatedly denied involvement in the Mumbai attacks and says the charitable organisations he founded and controls have no ties with militants.

On Monday, Pakistan announced it had amended its anti-terrorism law to ban militant groups and organisations that are listed as “terrorists” by the United Nations, a move seen to be targeting those charities.

In December, Pakistan’s government drew up plans to seize control of Saeed’s Jamaat-ud-Dawa (JuD) and the Falah-e-Insaniat Foundation charities.

Reporting by Asif Shahzad and Drazen Jorgic; Additional reporting by John Walcott in Washington; Writing by Drazen Jorgic; Editing by Alex Richardson